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[Wall Street Journal] Taking a Company Private Brings New Risks, Responsibilities for Directors

Fred Foulkes

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June 9, 2022

The Wall Street Journal recently published an article featuring insight from Fred Foulkes, Professor of Management and Organizations, regarding the risks associated with companies transitioning to private markets as regulators seek greater transparency.

More companies are beginning to exit the public market, which entails fewer regulatory obligations and which they believe will allow them to center their focus on long-term strategic goals. These companies have chosen to go private in order to lessen external pressures, gain the ability to invest in different company areas, and gain more influence over a smaller numbers of shareholders. Fred elaborates on this point by stating,

“When private equity buys a public company, the people who were directors with the company, their life with the company ends,”

Once transitioned to private, the size of board committees often shrinks, as do the regulations around filing requirements, such as quarterly earnings reports that are present in public companies. The Securities and Exchange Commission, however, wants to require more routine filings for private companies’ operations and finances.

Fred Foulkes is Professor of Management & Organizations at Boston University Questrom School of Business. Professor Foulkes has written numerous articles, including five published in the Harvard Business Review, and has developed over 160 case studies. Professor Foulkes is the founder and director of the Human Resources Policy Institute. The Institute is a partnership between Boston University's Questrom School of Business faculty and senior human resources executives. Its members include the heads of human resources for over 45 large, global companies, including Colgate-Palmolive, CVS, Fidelity, HP, IBM, P&G, and Raytheon.